DataOne Fine and Craig Coal Order: Why Air Permits Now Price AI Data-Centre Power
DataOne ran 123 megawatts of unpermitted gas engines for a Microsoft contract and was fined $1.07 million, less than three hours of contracted revenue. Washington, meanwhile, is making Colorado utilities pay about $700 a megawatt-hour to keep a coal unit on standby. Neither fixes the power shortage. Permits to generate on site will decide which AI campuses are finished on time.
New Jersey's latest enforcement case shows how little it costs to break the state's rules on data-centre power. On September 22 the state's environmental regulator fined DataOne $1.07 million for installing and running 62 natural-gas engines at its Vineland campus without air permits. The state called it the largest enforcement action ever taken against a data centre there. The campus supplies GPU capacity to Microsoft through Nebius, under a five-year contract worth at least $17.4 billion. Spread evenly, that contract comes to about $9.5 million a day, so the fine covers less than three hours of revenue. Three days later, on September 25, the Department of Energy ordered Colorado's Craig Unit 1 coal plant to stay available through Christmas. That unit barely runs.
The two actions expose where the AI power bottleneck now sits. Grid capacity is scarce and slow, and neither a state fine nor a federal coal order does much about it. What developers need, and what investors should be pricing, is a permit to generate electricity on site. Projects that have one will be finished on schedule. Projects that don't will run engines first and settle with regulators afterwards, until a regulator orders the engines shut.
The DEP order lists 62 reciprocating engines of 1,982 kilowatts each, about 123 megawatts in total. New Jersey requires a preconstruction permit for any generator above 37 kilowatts. Inspectors found the engines on July 29; they had not been on site at the previous inspection in December 2025. A thermal-drone investigation by Floodlight and the Guardian found 45 of the engines running in August. Maintenance logs show some had been operating since October.
The penalty is about $17,000 per engine, or roughly $8,700 per megawatt. The order gives DataOne 45 days to obtain permits or stop, and the engines can keep running in the meantime. DataOne says it disagrees with the finding and will apply for permits anyway, while it moves to Bloom Energy fuel cells as its permanent power source. Earlier this year it withdrew an application covering about 30 engines after the DEP found deficiencies in it.
The fine follows a similar case in Virginia. Earlier this month the state's regulators fined Microsoft $2.5 million after a June 2025 substation failure left a Leesburg data centre running diesel backup engines beyond its emissions permit for about a week. Both penalties were records for the regulators involved. Both are small next to the revenue from a hyperscale campus. A penalty regime set when data centres drew 20 megawatts is now being applied to campuses drawing 300. DataOne's Vineland site is planned at that size.
The federal response adds little usable power. Craig Unit 1 was due to retire at the end of 2025. DOE's new order is the fourth consecutive 90-day order and runs from September 27 to December 25. Energy Information Administration data cited by the Colorado Sun show the unit produced no electricity from January through March, 56,782 megawatt-hours in April, and none in May or June. Xcel Energy, which owns about 10% of the unit, said in a court filing that its share of the cost for the first half was $4 million. If the other owners bore costs in proportion to their stakes, keeping the unit available cost around $40 million, or roughly $700 for each megawatt-hour the unit actually produced.
The legal basis for the order has also weakened. Earlier this month the D.C. Circuit struck down the first emergency order that kept Michigan's J.H. Campbell coal plant open. It found that section 202(c) of the Federal Power Act does not give DOE the "sweeping" emergency power it claimed. Consumers Energy, Campbell's operator, says keeping that plant open has cost $259 million. The Craig order faces a consolidated challenge in the same court from Colorado's attorney general, environmental groups and Tri-State together with its co-owners. DOE issued the new Craig order two weeks after the Campbell ruling.
DOE's own list of orders shows the inconsistency. This year it has repeatedly authorised PJM, Duke and ERCOT to call on backup generation at data centres and other large loads as a last resort before grid emergencies. In winter storms and heatwaves, federal policy treats engines like DataOne's as grid assets. In Vineland, the state fined them as unpermitted pollution sources.
New Jersey has also tightened its rules. In July it passed a law requiring data centres to bring their own clean power and put them in a separate rate class, and in August it added semiannual reporting of energy and water use. A state that ended data-centre tax credits under public pressure could plausibly start shutting sites down.
Those rules may push developers in the other direction. By requiring developers to bring their own generation, New Jersey makes the on-site air permit the approval that decides whether a campus can operate, and the state controls how quickly those permits are issued. Developers facing a hyperscaler's delivery date and a permit queue that takes quarters will run engines first. They will pay whatever fine the regulator sets, because an idle GPU cluster loses more money each day than any penalty so far. For other developers, Vineland suggests that running unpermitted engines costs little as long as a transition plan exists on paper.
The costs that could hurt are an order to cease operations, which would halt the revenue the engines protect, and damage to the next project. DataOne's chief executive was promising residents of Frankfort, Indiana, on the day of the fine that his company would be a "good neighbour" there. That suggests the company knows its local reputation is harder to repair than its balance sheet.
Investors should value AI campuses by the permitted megawatts they hold rather than the megawatts they have announced. Developers with approved fuel-cell or turbine permits, and suppliers such as Bloom Energy whose equipment clears air rules more easily, are the ones positioned to benefit from this regulatory gap. Projects that rely on a utility interconnection due in 2029, or on federal orders that keep coal units available, are carrying more risk than their headline capacity suggests.
DataOne's 45-day window closes in the first week of November. We expect New Jersey to issue permits for at least part of the engine fleet with emission conditions attached, and not to order a shutdown. We also expect the D.C. Circuit to rule against DOE's Craig order in 2027 on the reasoning it applied to Campbell, while DOE keeps renewing the order every 90 days until then.